Gavin McPherson’s Secrets to Success: Why You Should Never Give Up Your Primary Source of Income for Property

Gavin McPherson, CEO of Oasis Properties is a buyer’s agent with over 40 properties sitting in his portfolio and will let us in on what is holding him back from continuing to invest in property now. We will also hear about some of the people who have inspired him in his property investing journey and, most importantly, the strategy he implements when purchasing investment properties.

Click play and listen in to find out how you can use McPherson’s strategy to grow your portfolio and how learning from the financial market can drive you towards your goals!

Learn content and about where markets head is not being a passenger, but being in the driver seat. - Gavin McPherson

To probably best explain our business, which is a little long winded, we are like a one stop shop. So we are primarily a buyers agency; largely with a specialising in investors. Not investors only but about 85% of our clientele are investors. We do my wife’s business also, we have a property legal department where we will run conveyancing, and we have a mortgage broking arm, and we also have a property management arm. And I think it’s the taking those 4 parts of the business together that gives us such a pulse on the market and not to mention obviously the good stock that we get our hands on through investors as well. If I had to brag you know, in the plug for the business, I suppose anything but I know you want to hear about, more so about meaningful tips on investors, the background of the business, basically myself if I could be so bold is that business, it’s a great business and I certainly enjoy it and I work the business very hard. The business is my cash flow vehicle but my real wealth was created behind that which is my own private wealth; through investing myself.

With so many fingers in so many pots, it’s unsurprising that McPherson has one hectic work schedule.

That just depends on the day because I really have one of the most don’t want to make people feel bad but I have one of the most enjoyable roles that I’m not one of those people that can do the same thing for 2 hours straight and that pretty much if anything sums up my week, my days and my years, I won’t be doing the same thing week in week out, so nor will I be doing the same thing day in day out, but um to give you an overview is one of my roles at the moment is make sure we are employing right and getting the right people, that is absolutely crucial and I think that I think that is something that I’m sure you will find with a lot of your other guests is consistent with your business, getting the right people, you don’t get that right you not going to get a lot else right, having said that obviously sometimes some of my partners and my staff won’t like to hear me say that but I do invest quite a lot of my time of my day on my own private investments so even as we speak I will be about to jump on a plane just to look after a certain deal myself, I’m looking at, which is in, you know sort of looking at a 30 million dollar deal which is something hopefully we can get across the loan in the next couple of weeks or so and I’ve been working on that since the GFC since I purchased something around about 2008, 2009 so um I know it’s a long bit away of answering your question, What do I do day in and day out? And I could only answer that by saying my only interest is fleeting in most things, I do put quite a lot of energy into things and I’m very efficient if there is any advise there for any of your listeners or clients of people interested be efficient in what you do and work out the most easiest way through and the quickest path through to find out whether something is plausible or not and that pretty much makes my day, I’ll have someone come in a put something on my desk and I’ll ask them 5 sort of questions that someone else might take 5 weeks to get to and I send them out of the office packing or I accept that there might be something that I want to do with that either a deal, either a property for one of my staff or you know a client that we are picking up and/or personal do it for myself.

So what are those five key questions?

I call it a mental index,  and what I mean by that sorry, that is a very specific question to what could be a broad range of circumstances but a really common one, so the one things I’ve always said to my buyers agents and obviously I will not pretend to be an actual buyers agent in so far as I don’t pound the pavement very often anymore if at all but what I do is I have my buyers agents and I have them come into me and their job is to pitch me a property because I always said to myself if I can get involved in this property invested myself that I would physically buy it I’m excited, and if I’m excited then I can pass it onto the client, so my some of my questions which I’ll get to in a short period of time is that one of my staff is basically saying to them pitch it to me, pitch it to me now and then I can see in their eyes obviously with experience with both staff members knowing their skill level and knowing their form as to whether this deal stacks up, so I might say something to them, guys, they will say Gav we can buy this for this price and I will say good but what’s its worth?  If they don’t have a smart answer for that and some comparables they might say come back and say look it’s a $1 000 000, and I say what’s it worth and they come back and say it’s worth $1 000 000, good try harder, go out the door, ok so they come back and their job is to come back when it’s at a price obviously when the offer has made me and my client some value. In the instance that they start to know me and they say, I knew you were going to say that, the next questions I there is your comparables and your comparables are stacking up, 1, 2, 3, 4, 5 shows up as being 920 sold next door, $975 000 across the road and 1.1 on the north side of the street, etc. And then all of a sudden you start to use that sort of efficiency dividend which I call within the office which is to work you matrix over and think they way I’ve been training having done this now for 15 years is to I flip things around and I consider myself, your job is to say no to things as quick as you can and as quick as you can do that because what it does is it allows more time for you to possible consider a yes.

Basically the day in-and-out of McPherson’s job is to act as a very strong filter against the tide of potential properties he is presented with everyday.

I remember starting the roll and obviously everyone goes for the lazy option let’s say realestate.com and the domain.com and I do get that um and obviously we still utilise that as a resource but if you actually go back and if some of your listeners might remember when the sales perhaps 15 years ago, those search engines were very very basic and actually because they didn’t have the same influence with the advertising either around them, actually they are a lot quicker and if I had a filter such that I would, I knew I could look at, I knew a clients brief, I knew what they wanted, I knew what good value was, and I could actually just be sporting 14 properties across my screen in about a minute, now obviously I know I’m an efficient builder and if someone else substitutes me a staff member and they can only do 6 a minute, you can imagine obviously the efficiency I can get someone of 14 vs. 6 so that really really important, so it’s I think there is something in you know I think we need to slow this line 20 years ago with an ad by I think it’s called John West, officially they would reject that makes him so good.  So that being the same notion as its getting through those “no’s” which allows me to invite “yes’s” in and you know my point being is now those search engines because they are so advertising heavy and obviously they got their business models to pursue, you cannot do 14 to 15 properties a minute and more, you might be lucky to get through 2 to 4 to 5, so even that efficiency has been diluted from that market place so obviously then now we are more relate on our own wares and obviously as evolved the business over time we now obviously have a lot more access off market properties as well.

As a property investor, McPherson considers himself to be remarkably unchanged throughout his years of property work. Although most investors would have changed their strategy over their journey, McPherson is one to hold to his guns.

I think I’m a purist and that to a purist I’ve the same concepts as I had 15, 20 years ago, I know they’re right and that’s not a cocky thing to say it’s just these investments rules have been followed for thousands of years, um they’re very easy to do, they just take a lot of patients and um yeah I so a purist I suppose would be one word and to describe myself as an investor I think this is a little bit I suppose I don’t want to diss the property industry but I try as much as possible, as much as possible to distance myself from educating myself from property industry because it’s not a very sophisticated market, you don’t have very sophisticated participants so it’s just exhibit A you go out there into the world and you find oneself a property article in the newspaper or the you know the internet or what not, they quality of information is the standard of Journalism  that just so low so and to amplify my point, I’ll give you an example and this has happened multiple times, I might get for instance a call from I can name one journalist at the moment I’m having an interview with tomorrow and she is a nice lady and always gives me a good run because of obviously some of our information that we give however that person I believe about 3 and a half weeks ago came out with an article on food, so are they a property journalist or are they a food journalist or is this really journalism just getting so diluted that they are not going to get quality that they get out of financial journalism so, so go back to your question, that purism that mentioned derives from things that work and people that, and so I’m reaching out from other industries and if I call it the financial industry, Warren Buffet I suppose by virtue of book I understand would resonate with you on most buyers but you know obviously I don’t have his huge wealth and nor would I expect to have even a fraction of his wealth over my lifetime but if anyone want to you know you could do a lot better things right now, to respect turning off this podcast and having a read of Warren Buffet as well to make you a much better investor than me because the guy is brilliant and it’s a few simple things he follows and it’s if you follow a rule, one of the rules of thumbs that I always say as an investor, one of the hardest things to do is not to do anything, um and if this is going into greater conversation about this moment in time, that being 2017, I think this is one of those times where a fair discussion between property investors or smart property investors is due, should we be doing anything at all and maybe just waiting and letting the dust settle a bit.

The hecticness of McPherson’s daily life seems to have originated from a life spent constantly doing things. From a young boy riding his bike until the streetlights came on, to a man training to be an Olympic-standard triathlete. For McPherson, it’s move, move, move… (I would include lots of sound in this piece/ starting guns, bike rides, alarms, storms etc…)

I grew up in  place called Guilford, a place called Guilford in Western Sydney and I could not fault and in fact I only have the fondest of memories of growing up to be honest, I grew up in a used to be a pig farm, my parents moved into this area which is a new housing estate at the time, I have memories of the hottest summers just like the one we’ve just had getting out on my bike and riding a day in the bush and not passing out the house and coming back leaving at 9 and coming back at 5 and just had a wonderful, wonderful upbringing, having said that and still owning properties out there I tell you it’s not the same place, I do know that and it’s not a dissing anyone from those areas or certainly investing in those areas but it isn’t the same place that I grew up in, I went to school in Granville Patrician brothers and then I ended up going to school at Marist Brother is in Parramatta and after that to see Mahicia and um yeah I suppose if that from a to put it in a nutshell my whole and soul existence when I was young right or wrong was pretty much brought up in sport that’s all I ever wanted to do, all I ever wanted to do and that was kind of caught me between swimming first and tennis and a little bit of football but largely tennis was probably my biggest passion and then unfortunately that gave way to um the female species and then I think I probably just didn’t take that step up and it’s something I think that I probably caught up with a little later in life which is my young adulthood, whereas I think I realised all the opportunities and maybe this is a lesson for some of your listeners out there and it’s certainly one of my regrets and I’m not assumed to say I have go some regrets in life as I had a lot of talent in those things but I mistook talent for effort and so you know I was good at a state national level at swimming, at tennis and would get to know all final late or a final four or every now and then work something and get through and win all runner up and having said that I didn’t put the work in it and I think I knew that, full circle I went and did my first undergraduate degree and I should which was a teaching degree and whilst I enjoyed it I knew I didn’t want to do it and I was always interest in entrepreneurism and certainly investing and I started investing early as well, by way of a mortgage given to me at a very early stage in life so my point is where I connected and were I think investing in this might sound bizarre but it’s absolutely meaningful to me and I still carry it through every day of my life as I exercise is I did, I got into triathlon and doing long distance triathlon, it’s something that, even now I was good and I could still compete at an Olympic distance or a short distance level but I just found that, I found that um the more, really simply the more work you do the better you go and it was that simple and because that formula was so easy I found myself literally 4 or 5 or 1, 2, 3, 4, 5, 6, 7 years in a row when all of a sudden branching out into a decade that one day training was not enough, 2 days training was not enough it’s the 3rd day and the 4th day and everyday backing up and that’s one thing just to actually get through the work and computer time but the second point is that I then started to get a kick out of things and when I say this I get a kick out of when it was raining outside and I had it in my schedule so I went for a bout of a period for about a year and a half where I did every single work-out that was commanded of me by my coach, every single, didn’t miss one, now I probably worked through a bit of illness there, not major illness but nothing I would complain about in hindsight it all carries with me now but um I did it more as a state of mind and I got a kick out of going out when it was the windiest, when it was the rainiest, when it was the darkest when it was the gloomiest when it was the latest or when it was the earliest and it just brought something out of me that I couldn’t imagine and that I never knew was there but having done it for so long what I actually realised was that showing up every day was actually not that challenging, put it all together day after day is a big big challenged so that period of time in my life and let’s call that 21 to 27 to 28 even to 30 is a little bit too long a bit of a stretch I was still fit then but certainly not world champion level but when I went to the world championships in 2002 that was a state of mind where I think I just something clicked and I realised that I now had to focus on other things in my life and as sport as good as I was in triathlons and I might and I did come 42nd in the world but to honest with you 42nd in the world as a football player would have had me metered but as a triathlete don’t do a lot for you but the lessons I took with me you know, is something that I held forever.

From there, McPherson had a moment where he didn’t really know what to do except to be investing.

I knew I wanted to make money, I probably thought of one developer but I think by way of you and I knowing each other you read my book, Vain investing in Property which is where I ended up in a place called Gladstone and that because obviously I wanted to develop and put some property in the market so that was a low point in my life, having said that I don’t think I would have got through that period if I didn’t have all those experiences almost immediately prior to that, so much success and then me not understanding that couldn’t compute that I could be unsuccessful, so um I don’t want to go through it because along as you know so I don’t encourage your people having to read my book that lesson that I learnt and living in a place that was pretty much doomed for demolition and seeing myself I’m literally all my investments I made when I was young, because I did make solid investments and they were very what can I say I don’t think it’s ever failed me if I had done my research done on those but all those efforts that I made had been resulted into a development that I go myself into just take me about $30 000 out of my bank account every month and paying for those and there is a life span on that because you investments might be the age of 30 eventually that money runs out so I had that coming and I had obviously a new girlfriend/wife at the time and we made a decision to not even see each other for 18 months but such was the concern about our financial situation so I was Dustin and we got ourselves out of the situation and I found myself where what would happen on the back of my research people would say can I fly you back to Sydney, can I fly you to Brisbane, can I fly you to Melbourne please, can I fly you to Perth so you can find us this site or these investment property, now I’m done tiling into what they stand me as a buyer’s agent and I didn’t do it because I wanted to I thought it was a silly role this is getting on almost 20 years ago now, I didn’t even know it was a role and I’m not even sure there were licenses that buyers agents at those stages but I got myself into a situation where I had to see to those roles and I took it and then if anyone remembers obviously historically 2001 to 2004 created a property boom that even up to now we haven’t seen the like of and it certainly from percentage it was much more powerful drive than this one we living in now so um and then that was all she wrote pretty much, one that happened I found myself with so much work in Sydney, Melbourne Brisbane that I had to, I had more than enough money to even pay for the developments and then some irrespective of me even being there so I didn’t need to be there and see through all those developments and I subtracted myself to be successful to the extent that I actually never ever, ever lost a cent on property investments so I think that I have got that scratch to my name and I don’t think like Quanta’s I think I’d like to protect that reputation till the day I die, having said that it wasn’t overall successful either but I learned a good lesson and it put me into the occupation I’m in now and if I just, maybe if I just close the loophole off to actually explain how I merged into the business we have now, my wife is actually working for the government at that time at the planning departments where they buy all the future track of land along railway lines etc.  And I found myself if anyone of your listeners know what it’s like to be given this up you go for a property for a client, you like the property, you either ring the client and you might say “Are you interested in this property?” and then low and behold by the time you get back to the office, someone else had already got interest in the property and or bought it such is the pace of the market so I said to my wife if you come over out of your work and work for us you can make sure because obviously her experience and being able to manage the legal’s, we can make sure we can be another you know one or two days ahead of all our competition on transactions so I basically we got a bit of a reputation I suppose when you had us you had even if the price was the same and my job was to make sure the price wasn’t the same, my job was to make sure that we can execute a better price to sell but assuming the price is the same we’re one or two days quicker than any other purchaser so it just sort of like an insurance policy for our clients and that kind of started Oasis Property as kind of a small enterprise and yeah then here we are 15 years later.

Although he can’t attribute any property investing influences to his parents McPherson acknowledges that their hard work and dedication in life is what made him strive so hard in sport, and in his business.

It’s one of these things and I certainly got to expect anything out there that might in the end find its way into my mom and dad’s ears so obviously I want to complement them absolutely and suggested that you know everything that they taught me certainly I think relating to  kindness and hard work and education and loving yourself, you family and if you got through, having said that we weren’t wealthy at all, I do have maybe somewhere as much as I might have embellished that story but not embellished but that was my true tale of me doing all that work day after day, leading up to say for instance my iron man pursuits, I do actually remember my father in so far as we had a 3 bedroom, 3 bedroom, 1 bath, 1 car house and I remember this because he would wake up in the morning and he would be in the toilet and obviously we would need to get in there before we ducked out for sport, my point is Dad was up at 5 o’clock every morning and in the car before 6 and every single day for it must have been 40 years and he was like a metronome, he was like clockwork and so maybe that story that I gave before maybe aligned lessons that I was suppose unconsciously learning from my father which is just repeat, repeat, repeat, good habits repeat, repeat, repeat, I won’t pretend that those good habits from my father contributed to lots and lots of zero’s after his name but if he passed anything down to me it just that, that paid off and so my mother, and look my mother is certainly a really stern women and to some degree but a very loving women but absolute a very stern women and I think she probably, she almost definitely teaches me a very high degree of cynicism, every transaction I make and now because obviously I know you want to understand most things about me as an investor and it maybe about property deals that come across but please understand my role, a greater business person and that you know I do have a lot of friends and one of my, sorry what I meant to say is a lot of friends that are high network individuals themselves and I’ve got one friend and it reminds me of lessons I would have learnt from my mother is that if you wake up every day and say yes to everyone that asks, you will be bankrupt by then end of the day and it doesn’t matter how rich you are, so um that probably another lesson that my mom certainly takes in there and she even now to talk to my mother and they both thank God of course they are still alive and still with us, yeah just reminds me of those sort of baptises that you need to put in and that I’m probably overly cynical and I’m probably over question a lot of transactions and probably demur from a lot of transaction because of maybe perhaps I have a deep seeded distrust of sometimes not even the person but maybe the reputation that might go before them but in any event it can be hard to cut through with me and get some transactions going but that maybe just also slips into the filter as I mentioned before was you know you have to say no to a lot of things before one thing comes across and you say yes to.

McPherson found property investment inspiration from a range of sources, including his surrounding family, and even the most powerful man in America.

You probably not going to believe this because it’s just absolute coincidence, Donald Trump’s book didn’t hurt the situation, put it that way, Donald Trump had a book out a long time ago, so as, and I should say, I should also mention that I have family that are property developers so it certainly wasn’t far into me, I knew that was the ability to make a lot of money doing it and as much as obviously I mentioned my parents and their interests, we certainly always circling around property let me say tradesman and builders etc. So I knew by virtue and actually if I can give myself another compliment if I’m allowed.

Sure.

I’m good with my hands, I’m very good with my hands so I think I really enjoy actually building myself so I know most trades and when I say I can do most trades, I mean I prefer not to of course but it helps to have across the board, I can you know you can pretty much sit there and not be leased by a builder preparing a contract for you and go on site everyday and that is a real powerful tool to go on site everyday and know actually what the order of business should be going and that’s something I learnt pretty much even before I was 20 and to have that skill set and behind you know the effort, A it probably taught me enough to know the job wasn’t for me but it taught me to at least that that was a vehicle through which you had to bear the cost of or either the effort of which is dealing with builders to get through.  So that’s how the conversation about what maybe want to develop, I do remember you know I think it was probably more an influence of my uncle as I mentioned I do remember and I remember even where I read the book which was in Sydney Library, Donald Trump’s book, which is and I can’t remember because he wrote a few but one of them might have been The Art of a Deal, a book he wrote in the early 90’s.

Um hum (affirmative).

And that certainly resonated with me at least from I found from negotiation which I think suited my demeanor or my skill set maybe perhaps my communication skills and I thought that was something I could deliver and so what I did effectively to explain I went to Gladstone on the back hills of basically putting all my investments that I’d made prior, just good investments, solid investment in Sydney mind you  when I was young so seems like pretty much could afford a mortgage, I got a mortgage and parlayed those profits or that equity into 3 sites in Gladstone, one of those was a block of units, one of those was called a boarding house I suppose you would say, only had one title but soon get it so you can rent and one of those was a house and to cut a long story short and maybe to give some advise and this is where I’m going to remind myself about how to finish off a conversation with your bad cash flow.  I thought I could develop and just be a developer from day dot and what I realised is and the biggest mistake I made is that I thought I was going to demolish this house which I did and I thought I was going to get a DA within 6 to 8 weeks and I don’t know why I thought that, I thought perhaps because I did make a few trips to council, I met the Mayor because you know I explained the investments myself and my family where making in the town at that time and for some reason I thought this might have been the 1970’s and maybe his hands were against the table looking for a brown paper bag that weren’t there, it wasn’t there, in any event and in the event I was left out the DA for call it 8 to 10 months, but me being the fool I was I knocked down 2 of those places pretty much immediately, no cash flow.  

McPherson shares a very important lesson and looking back in hindsight he wants us to not make the same mistake.

The point I make to your listeners is cash flow is king and this probably now, this is one of my passions if I could spend and I do spend a large portion of my week but certainly not as much as I would like in actually just educating people and it means, because I love it so much it earns no money for me but that’s to get these people, these sprookers, there’s people that stand in front of thousands of people every week in you know town halls and meeting rooms and these shady little conference centres, writing some of these seminars and I don’t mind the message per say, don’t get me wrong I really appreciate what people like Anthony Robbins have done for the world, having said that they run these headlines of give up your work, who doesn’t like your work, no earn your salary every year without working for another day in your life and the problem you’ve got with that message the biggest problem you’ve got with that message is that resonates with a certain element of the population and I really don’t want to offend anyone but I probably may just in doing it but I hopefully it only comes across as my honest opinion is that message tends to resonate with people who don’t like their jobs and those jobs tend to be paying average salaries and let’s call it $40 to $70 000 a year and those jobs cannot be by coincidence average jobs so by definition they are not jobs people want to do forever so when they hear a message do you want to break out, it’s like it’s taking candy from a baby, it really is taking candy from a baby and obviously past that point once you have got people sucked in and they are in that seminar room and you can almost tell them anything so from someone like myself you know look and I suppose you wanted to hear the question about me which I haven’t answered that question about development and how that ended,

I did answer that somewhat before but explain to your clients that the cash flow that was necessary to keep that going was my biggest downfall and why I didn’t stay the developer with $30 000 coming out of our account, out of my pocket every month, I had at least an income of $50 000 to $100 000 a month to at least see these things through which I didn’t have at the time because I said I’m just going to be a developer so my point is if people don’t like their job before they make that excursion and decide to quit their job and go and buy 64 properties in the bush, right I think, I really think they would be, they’d owe it to themselves to maybe take a holiday first, right and spend that amount of money on themselves maybe even consider might of finding some other changes in the organisation or some changes to an industry that they actually did enjoy because it’s one thing even as wealthy as I am now it’s one of those things, I don’t, I don’t expect to go from where I want to be in 3 years time if I try to do that tomorrow I would go broke and that’s almost anyone who is ambitious and trying to get to the next stage in their live so cash flow is very important and I would be the last person to suggest that your clients, you listeners went out and quit their jobs tomorrow to become investors because you need cash flow and finding that cash flow vehicle is really important and like I said at the start of this interview is I look I make my money from investing and so someone might say to me why don’t you just give up your job, in fact I had the question yesterday, why don’t you just give up your job and be a professional investor and the bottom line is um as good an investor as I am I know that 3 years out of 10 it’s still going to be bad times and I have to suffer through those  and I need income and the other thing I learnt is when you are a business person and/or investor or you can almost call it the same but the investor is still a business person you make terrible, terrible decision when you do not have money coming into your bank account and those decision do not make for wise, for future profit growth.

You could absolutely learn a lot from the financial market and the first thing I do is get people locked on to this train. Actually learning content and learning about where markets ahead is not being a passenger, but being in the driver seat.

How To Buy Low & Eliminate the Competition

As McPherson shares, he believed his property investing method of accumulating wealth was quite easy to apply.

I’ve actually gone full circle to some degree and made people start to believe now that once you have as many properties as you do, it starts to become a little punitive. If anyone has read my book, it’s got a story out of it stating property is not the mission – it’s about collecting money. Now let’s not forget the moral argument of collecting money, whether that’s right or wrong to say we are collecting money, but property is just a vehicle. So my point is, I suppose at the start I thought property was an easier way to get there and I still believe that, so nothing has changed in that.

So to give you a contrary point of view, if I sat right now with everything I’m investing in I can tell you with absolute confidence that I do not believe that property will perform the best thing in my portfolio in 2017. However the difference with that is with property I can take $100 000 and I can borrow $900 000, which makes a million. And if the market goes up by 10%, I’ve actually got 100% return on my investment, obviously forgetting my friction costs.

Let’s execute that to another investment, and if I could be so bold, some people would know I’m a big commodity investor right now and I’ve got something close to a couple of million bucks in a uranium mine. Chances are some are not encouraging people at all to get themselves into uranium, however I believe over the next 12 months that will be a much better investment. Every single dollar of that uranium investment is cold hard cash. With a $2 million property I only have $400-500 000 up for grabs. So property has leverage going for it, do not pretend I think people are only kidding themselves if they think property is the best performing today – because it unequivocally is not – but it’s excellent with leverage. Now I don’t have a disdain for a property has been very good to me, but I’m probably more inclined now to be a divestor of property rather than an investor of property. When you get to a certain level it doesn’t make sense to carry 40 or 50 properties under your arm and pay all your holding taxes.

Although having a mentor has not worked for him personally, there are multiple people who have inspired him. In addition to certain resources which he has used to educate himself on the industry, he says diversifying your resources is paramount.

I always encourage people they must read the book The Trick to Money is Having Some by a gentleman called Stuart Wilde.

I think for some people a mentor can be very helpful, however people have to be very careful and I see mentors as a bit of a danger. The reason I say that is because you need to look within for your own mentor, you need to be that person that changes yourself. I take tips from people that I can disagree with – they can know 99 things but if they have one great pearl of wisdom, I take that pearl of wisdom. But the perfect individual doesn’t exist and the perfect investment doesn’t exist.

To give you an example, everyone who has read my book would know I love Warren Buffet – he only really applies five or ten rules to his whole life and makes him the 2nd or 3rd richest person on earth; certainly the richest investor on earth. Having said that, I really actually aspire to a lot of his political understanding but I think he is actually almost primary school age in the way that he understands the world and that sounds like a remarkable statement, but that’s my opinion. So I suppose I try and suggest that people are the ones that are creating their own future and if they can get a good tip off of someone, that’s great, but to consider them as a mentor and everything just hasn’t worked for me.

There is a gentleman called Frank Giustra, almost no one knows anything about him in this country but he is a billionaire out of Canada, he owns a company called Lions Gate. Frank is an incredible guy, he is an economist as well so it certainly shows the amount of deliberation and has got some amazing lessons. He’s taught me how to start to look at what makes the world tick – the three biggest leading indicators of our economy are China, USA and Europe.

You could absolutely learn a lot from the financial market and it’s the first thing I could do is get people locked on to this train. Actually learning content and learning about where markets ahead is not being a passenger, but being in the driver seat. I want these people to pick up The Australian every weekend; I want them to pick up the Financial Review everyday; I want them to listen to Lateline on Channel Two every night; I want them to invest themselves into actual financial markets, not just locally but globally. And understand that we are followers here, we’re not leaders. So I’m expecting some of these investors and hopefully some of the listeners start to listen to this and sort of man up to the occasion because these are pretty tough times ahead. When I say tough times, anytime there are a tough times for some people, there is opportunity for others. So let’s turn listeners into opportunists.

McPherson found property investment inspiration from a range of sources, including his surrounding family, and even the most powerful man in America.

You probably not going to believe this because it’s just absolute coincidence, Donald Trump’s book didn’t hurt the situation, put it that way, Donald Trump had a book out a long time ago, so as, and I should say, I should also mention that I have family that are property developers so it certainly wasn’t far into me, I knew that was the ability to make a lot of money doing it and as much as obviously I mentioned my parents and their interests, we certainly always circling around property let me say tradesman and builders etc. So I knew by virtue and actually if I can give myself another compliment if I’m allowed.

Sure.

I’m good with my hands, I’m very good with my hands so I think I really enjoy actually building myself so I know most trades and when I say I can do most trades, I mean I prefer not to of course but it helps to have across the board, I can you know you can pretty much sit there and not be leased by a builder preparing a contract for you and go on site everyday and that is a real powerful tool to go on site everyday and know actually what the order of business should be going and that’s something I learnt pretty much even before I was 20 and to have that skill set and behind you know the effort, A it probably taught me enough to know the job wasn’t for me but it taught me to at least that that was a vehicle through which you had to bear the cost of or either the effort of which is dealing with builders to get through. So that’s how the conversation about what maybe want to develop, I do remember you know I think it was probably more an influence of my uncle as I mentioned I do remember and I remember even where I read the book which was in Sydney Library, Donald Trump’s book, which is and I can’t remember because he wrote a few but one of them might have been The Art of a Deal, a book he wrote in the early 90’s.

Um hum (affirmative).

And that certainly resonated with me at least from I found from negotiation which I think suited my demeanor or my skill set maybe perhaps my communication skills and I thought that was something I could deliver and so what I did effectively to explain I went to Gladstone on the back hills of basically putting all my investments that I’d made prior, just good investments, solid investment in Sydney mind you when I was young so seems like pretty much could afford a mortgage, I got a mortgage and parlayed those profits or that equity into 3 sites in Gladstone, one of those was a block of units, one of those was called a boarding house I suppose you would say, only had one title but soon get it so you can rent and one of those was a house and to cut a long story short and maybe to give some advise and this is where I’m going to remind myself about how to finish off a conversation with your bad cash flow. I thought I could develop and just be a developer from day dot and what I realised is and the biggest mistake I made is that I thought I was going to demolish this house which I did and I thought I was going to get a DA within 6 to 8 weeks and I don’t know why I thought that, I thought perhaps because I did make a few trips to council, I met the Mayor because you know I explained the investments myself and my family where making in the town at that time and for some reason I thought this might have been the 1970’s and maybe his hands were against the table looking for a brown paper bag that weren’t there, it wasn’t there, in any event and in the event I was left out the DA for call it 8 to 10 months, but me being the fool I was I knocked down 2 of those places pretty much immediately, no cash flow.

McPherson shares a very important lesson and looking back in hindsight he wants us to not make the same mistake.

The cash flow that was necessary to keep that going was my biggest downfall and why I didn’t stay the developer with $30 000 coming out of our account, out of my pocket every month, I had at least an income of $50 000 to $100 000 a month to at least see these things through which I didn’t have at the time because I said I’m just going to be a developer so my point is if people don’t like their job before they make that excursion and decide to quit their job and go and buy 64 properties in the bush, right I think, I really think they would be, they’d owe it to themselves to maybe take a holiday first, right and spend that amount of money on themselves maybe even consider might of finding some other changes in the organisation or some changes to an industry that they actually did enjoy because it’s one thing even as wealthy as I am now it’s one of those things, I don’t, I don’t expect to go from where I want to be in 3 years time if I try to do that tomorrow I would go broke and that’s almost anyone who is ambitious and trying to get to the next stage in their live so cash flow is very important and I would be the last person to suggest that your clients, you listeners went out and quit their jobs tomorrow to become investors because you need cash flow and finding that cash flow vehicle is really important and like I said at the start of this interview is I look I make my money from investing and so someone might say to me why don’t you just give up your job, in fact I had the question yesterday, why don’t you just give up your job and be a professional investor and the bottom line is um as good an investor as I am I know that 3 years out of 10 it’s still going to be bad times and I have to suffer through those and I need income and the other thing I learnt is when you are a business person and/or investor or you can almost call it the same but the investor is still a business person you make terrible, terrible decision when you do not have money coming into your bank account and those decision do not make for wise, for future profit growth.

Having grown his portfolio to over 40 properties, McPherson has formulated a clear strategy for investing in property. He also acknowledges that sometimes the hardest thing to do as an investor is nothing at all.

I buy low every single time. When I say that, I don’t just mean a property today, which I believe is an overpriced market in Sydney and Melbourne (for instance at $1 million and pick it up for $900 000, because I believe that $900 000 is a too expensive in 1.5-2 years’ time). I look for things that are in the toilet – whole industries, property, uranium, Iron Ore, banking. I don’t care where – I look at things that smell because I’m looking for great assets when there is no buyers.

To take that to another level, if the market across an industry like in uranium it might be 500% down, in property it might be 10-15% down. When it’s in that environment already then I go around and I make sure I shave another 10% off that already, which I call my margin of safety. So irrespective of whether I hold that property as a core asset with meaning forever or I trade it, either way I am covered. Now what happens is it’s a beautiful coincidence that when you’re buying things at the bottom of the market, you’ll find that their yields are particularly high.

Let’s say $185 000 for something in Sydney, I will go back to 2012 – 2 bedrooms, 1 bathroom, 1 car, $565 000 in Coogee – and I think everyone would acknowledge that around the Eastern Seaboard that that is a great property and with $650 per week return. Now as we know 5 years later, now where we are 2017 that property is worth $900 000, however that yield has now gone down to $580 000. Now I’m not crying in wedgies over that because I paid $565 000. Because the more property gets market go up and more property gets supplied and investors put stock onto the market for tenants to occupy, rents go down. But in a way I think the example is really clearly purchase $565 000 now worth $900 000, only renting for $580 but picked it up at $650 rent, that’s all I do. It’s a really simple formula and right now – with a few exceptions – I don’t buy in Sydney or Melbourne. That’s the lesson I think we had in the last podcast which is that sometimes, one of the hardest things to do as an investor is nothing.

In a situation where you have purchased a property in a declining market and it is not improving, McPherson shares with us his tactics, including the importance of having a backup plan.

This for me is that moment like if anyone has ever driven a manual car and it just clicks. Let me say this: the cure for high prices is higher prices. And the cure for low prices is low prices. Now that might mean nothing to people or everything to people, OK so let’s just go with this. I pick it up for $185 000 and… let’s go with the Gold Coast, 2007-2008 – prices were too high and that creates an environment where everyone is putting new stock on the market because everyone is encouraged to do so, correct?

Correct.

However after creating that situation where we had an oversupply and prices have dropped to such an amount that people were not incentivised to build any new property for another 9 years. That creates an environment where eventually the prices get down so low that no more stock is being built – and that can happen.

So I could apply this to muffins – eventually if you take sugar (and I should know the ingredients but I don’t), egg, water and flour I’m imagining to put into a muffin and they all cost you $1.35 and the market only pays you a $1, what that means is people who do that for a living will not make muffins anymore. And the ones that are currently doing it have a muffin process on the go that will go bust. Over a very short period of time, eventually that will mean no muffin decorative for an extended period of time.

Let’s pretend it’s property. What it means is if I’m wrong about the Gold Coast and prices don’t go up, there is no incentive to put extra product in the market. So eventually those properties that people are holding – especially with interstate migration at the Gold Coast – all that means is you are going to be holding a property for $365 000 and your rent is going to go from 400 to 450 to 500 to 550 to 600. So how is that a bad thing?

So basically you’ve got a backup strategy behind it in case something goes wrong with the purchase.

Exactly. Now having said that I was very disingenuous in saying that, because markets don’t function that way. When returns get to about a 4.5-5% yield, the market recognises that and closes the gap just like they are doing right now.

You get a property you for $365 000, you getting $350-365 a week rent for it, eventually the market wakes up because they are going to get the same return in Sydney and then go, ‘Oh I’ll go to the Gold Coast.’ Put it another way, you’ve got a $1 million block of land and let’s put a $500 000 house on top, equals $1.5 million. So let me ask you – if the market came up and only paid you $1.3 million for it, what would you do as a developer?

You would go bust. And you wouldn’t do it in the future, if you were a developer on the sidelines thinking about it. Eventually that happens for so long, people come to your door and go, ‘Well what if I give you $1.6 million for it?’ So in short, what you have to remember is when you’re getting a high yield there is not enough property. Insofar as what if the price doesn’t go up, that’s really easy, that just means that the people will still be moving in because I’m taking the underlying principle that I go into areas where I know migration is going to be in the right direction. We’re talking about what we know as highly predisposed to upward growth, so as long as we take that premise we know that in the future without enough dwellings, rents are going up.

Exercising is a big part of McPherson’s life and contributes to his state of mind which, in turn, aids him in his success.

I used to exercise, I started 1000km a week on the bike, 130-140km running, probably not the most swimming but maybe 15 or 20km. So every morning I’m on my paddle board, I then swim straight afterwards and I may run, I may not. That might sound like a lot to people, it’s kind of just my morning – I get that over and done with before 6.30 and then usually because my gym is across the road from where I work, I go to the gym twice a day. I do go to sleep at 8.30 at night now, so that might not sound like the most enjoyable life on earth but I enjoy it, I make sure I have a little 20 minute workout in the gym and then I leave and go finish some work, then I go back in the late afternoon when I’m starting to get a bit sleepy and have another workout for about 20 minutes.

I think that that is a place of mind when I feel healthy and strong. I take that into my working life and I really embrace that now. And I’ll be honest with you – this is probably the downside of that – I do suffer from depression and that’s a personal thing I don’t always enjoy telling people and I just know now when I don’t inject those things in my life, that just amplifies any new depression I would have a chance of getting. So exercise is a must for me.

If you enjoyed this episode and would like to reach out and connect with McPherson, here’s how you can do that.

I get about 2 or 3 emails a week where people will just email at info@oasisproperty.com and thank me for lessons they might have learned from my book. And to a man, almost every single one of those people – at least when they are local – I try and make an effort to catch up with them. Almost every single one of those persons cannot afford our fees, so certainly I never fish for business.

You are welcome to ring our hotline 0870, or (02) 8705 3252, that’s our Sydney number but it will get through to our other offices as well. At this stage in business I’m actually happy to ask for people’s business in this sense because we have four prongs about business – we have a mortgage broking arm, we have a property management arm, we have legal division and we also have a buyer’s agency but to use our buyer’s agency it is a $9 680 service just to start. However for people that do use that service, they’re a client for life so you are always welcome to come.

If they want to contact us through those numbers or email or our website www.oasisproperty.com.au.

This episode was produced by Alex Cooper with narrations and interviews conducted by Tyrone Shum.

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